Meet the Speaker
Director – Latin America,
What is your main goal for 2020?
To make a significant deployment of our recently closed Actis Long Life Infrastructure Fund (also known as ALLIF) here in Latin America. ALLIF, a circa USD1.25 billion fund, invests in operational, high quality, highly contracted infrastructure assets (mainly power and gas) across high growth and emerging markets, seeking to hold such investments for 10 years or more and provide a stable dividend yield to our investors.
Can you give a brief overview of Actis’ investments in Mexico?
Actis currently holds three investments that have all or a substantial part of their operations in Mexico: Saavi Energía, Zuma Energía and Atlas Renewable Energy. Combined, these 3 Independent Power Producers hold circa 3.5 GW of installed capacity here in Mexico (both thermal and renewables, including Mexico’s largest wind plant) and a large pipeline of projects under development.
What is your criteria for investment?
Our energy and infrastructure funds target mainly sustainable energy assets that are enablers of a cheaper, cleaner, more reliable energy in the markets where we invest, and as such, are of crucial importance to the economy: electricity generation, transmission and distribution and gas transport and distribution mainly.
From a generation standpoint, we are technology agnostic (solar, wind, hydro or natural gas) and determine which power technologies are cost competitive in each geography so that our investments can be cost competitive in any scenario. We are attracted to stable, reliable regulatory frameworks and develop or invest into contracted or regulated assets. The certainty of long term, contracted cash flow protects the downside of these investments. Given that we can invest both directly or through our platforms and jointly with our investors, we can be quite flexible from an equity check perspective. We do both greenfield and brownfield, obviously seeking different returns.
What else do you look for in your investments that people might not suspect?
A positive social impact in both the country and the local community in which we make the investment. Recognition of our responsibility to wider society has always been central to our business and is fully integrated into our investment processes, from origination to exit. Not many people know that Actis spun out of the United Kingdom’s Development Financial Institution, CDC, 15 years ago. Responsible investment is embedded in our DNA. I think that it is fair to say that everyone at Actis believes that, especially in the markets where we operate, our values drive financial value to our investors. Energy is crucial to both a country’s economic development and to its population’s well-being. Yet around 1.3 billion people have no access to electricity; an estimated USD4 trillion is required from now until 2035 simply to meet current demand in our markets. Providing electricity to the world’s growth markets represents a compelling investment opportunity.
Do you feel that the cancellation of the energy auctions have affected you or your portfolio companies? How?
It has not particularly impacted our portfolio companies given, that in the case of both Zuma and Atlas, their business plans, from a PPA/commercial perspective here in Mexico, had been completed prior to the cancellation of the auctions. In any case we do believe that the market fundamentals remain in place, namely resource and demand growth.
What do you feel is the main challenge investing in renewables in Mexico nowadays?
An evolving regulatory framework.
If you could change one thing about Mexico’s energy market, what would it be?
The market and the overall population could benefit greatly from a stronger, more integrated transmission and gas network.
What advice would you give to someone thinking of entering Mexico’s energy market?
Consider a strong local presence (Actis has circa 500 employees in Mexico, both directly and through its portfolio companies). Work very closely with the local communities where you want to develop or build your projects. Be patient.
And lastly, what one book or movie has changed your life?
A couple of books. “On the road”, by Jack Kerouac, when I was 24. And “On the shortness of life”, by Seneca, when I was 34. Two different perspectives on the same topic read at two different stages of my life.
Javier Areitio will be speaking on the CRITERIA FOR PRIVATE EQUITY & DEBT FINANCING FOR POWER & CLEAN ENERGY panel at the 2020 Mexico Assembly. The panel will be focusing on investors main concerns in 2020, new types of financing and how the shift to investing locally and sustainably is effecting Mexico.
Director Energy, Actis LLP
Investment Executive, Infrastructure, InfraRed Capital Partners Mexico
Jaime Perez de Labord
Managing Director, Balam Fund
Diana Ruan Hernandez
Investment Officer, IFC